Serbia's central bank to keep rates on hold: Reuters poll

Reuters Staff

3 Min Read

BELGRADE (Reuters) - Serbia’s central bank will keep its benchmark interest rate at 4 percent on Tuesday, even with inflation barely reaching the lower end of its target band, due to an upcoming presidential vote and persistent global uncertainty, a Reuters poll showed.

All 13 analysts and traders polled by Reuters ECONALLRS since Feb. 1 said the central bank will keep the rate RSCBIR=ECI, RSDREPO= at 4 percent, as it did in January.

Last month the bank cited concerns that more U.S. Federal Reserves rate hikes could hamper demand for emerging market assets as a key reason to keep the rate unchanged.

Serbia’s dinar currency and debt have remained relatively stable since the Fed hiked rates last December, while inflation reached 1.6 percent in December, barely above the lower end of the 2017 target band of between 1.5 and 4.5 percent.

The Statistics Office will give the January figure on Feb 23.

In an analysis, the Addiko Bank said policymakers would also opt to seek stability and keep rates steady due to upcoming presidential elections set for this spring.

“We expect the NBS (central bank) to keep the key rate unchanged at 4.0 percent as inflation entered the lower part of the ... target band, forthcoming elections and persistent global uncertainties,” it said.

The April election will pit presidential candidate of the Prime Minister Aleksandar Vucic’s center-right Serbian Progressive Party against the fragmented and bickering opposition.

The vote will be a crucial test of popular support for Vucic government’s economic reforms and a bid to speed up accession to the European Union, while maintaining close ties with allies Russia and China.

In late January and the first week of February, the dinar EURRSD= mildly lost value to euro, mainly due to seasonal factors and concerns over U.S. rate policy, prompting the central bank to intervene to bolster it.

According to the International Monetary Fund, which maintains a 1.2 billion euro loan-deal with Serbia, country’s growth is seen at 3 percent this year. In 2016, Serbia’s economy grew 2.7 percent.